Add the Southern District’s recent string of non–Wall Street coups—one of the biggest Medicaid-fraud cases in history, plus a run of public-corruption cases including Mayor Bloomberg’s embarrassing CityTime scandal and the busts of state senators Hiram Monserrate and Carl Kruger—and Bharara seems to have packed a lifetime of blockbuster cases into just twenty months. “They’ve come back to life,” says Spitzer (himself a onetime victim of a Southern District investigation). “Clearly, Preet said, ‘Guys, the secondary role the Southern District has played in recent years isn’t doing us or the people justice.’ ”
Last fall, Bharara appeared at a panel discussion for white-collar lawyers moderated by his old boss, Mary Jo White, now a partner at Debevoise & Plimpton (“Thank you, Dr. Frankenstein,” he said to her at the start). At the end of his remarks, Bharara mentioned a report in the morning’s paper that his law-enforcement counterparts in Great Britain, desperate to stop insider trading, were ordering the taping of traders’ mobile-phone calls.
“There isn’t such a rule in the United States, is there?” White asked.
“There is not,” Bharara said.
White turned to another panelist, SEC enforcement Chief Robert Khuzami—also a former prosecutor in the Southern District. “And Rob—will there be?”
A long pause.
“Umm,” Khuzami said. “I probably can’t comment on that.”
The room erupted in laughter.
“That was helpful,” White said. More laughs.
Then Bharara grabbed the microphone again. “Look, it is something that not only we are thinking about, not only other law-enforcement agencies in the United States are thinking about but also other countries are thinking about,” he said. “And it is only, I think, logical.”
Bharara considers such tough tactics a necessary tool for the times. Given the near-infinite supply of publicly available financial data, he has said, “it becomes easier for people to argue in retrospect that the reason for the trade was based on a public report. Even if it was never read. Even if it was never believed. Even if it was clear that it was not true.” In October, he told the New York City Bar Association, “It does not take a rocket scientist to understand that it would be helpful to have the actual recording of the communication.”
Bharara’s critics counter that wiretaps are costly (one estimate puts the Galleon investigation at northward of $1.5 million) and that warrants that lead to searches can generate headlines that can destroy whole companies before anyone makes it to court. “A prosecutor has the power to do tremendous harm to innocent people without even indicting them,” Bainbridge says. Before Bharara, veteran Southern District prosecutors say, many insider-trading cases were directed to the SEC or overlooked. Now, some say, too many are being treated as criminal matters. “It’s gotten totally out of control,” says a senior Southern District alum now on the defense side. “I don’t think insider trading’s the crime of the century, and we didn’t treat it that way when I was prosecuting it.”
But by far the most far-reaching complaint is that today’s insider-trading perpetrators are not the true villains of the era. Those people, the Dick Fulds and Hank Greenbergs of the world, may not be prosecutable. Taking on reckless levels of risk or pushing sketchy credit-default swaps on an unsuspecting public may be deplorable, but it’s not necessarily against the law. Bharara’s harshest critics accuse him of pandering—catering to the public’s unsated hunger for justice. “I suspect the Madoff scandal, the housing crisis, and the credit crisis all led the prosecutor’s office to think they ought to take a look at Wall Street,” says Bainbridge. “And when they started digging around and seeing these expert networks, I’m confident they said, ‘We really need to clean up this area.’ But the fact that it was politically advantageous was certainly the icing on the cake.”
Bharara has acknowledged that the financial meltdown plays a part in what motivates him. “We have aggressively pursued fraud whenever and wherever we have found it,” he said in October. “And we do not intend to stop or slow down—especially now, with the economy down, public frustration up, and epic frauds surfacing with increasing frequency.” But then, what else can he do? What other choice does he have? “The media and Congress and members of the public want the scalps of financial bigwigs,” says Daniel Richman, a professor at Columbia Law School and former assistant U.S. Attorney in the Southern District. “And this isn’t that. But this seems to be taken as a substitute for that, at least for now.”